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My Two Cents

The Inflation Tea Leaves?

Chris Farrell Sep 21, 2007

What story is the market telling us? The stock market rallied on the Fed rate cut of half-a-point. So far, so good.

But bond investors aren’t happy. Long-term bond yields, as well as the rate on fixed-rate mortgages, rose on inflation worries following the Fed easing. Similarly, the dollar spiraled lower and the price of gold is up.

One of these markets is wrong about the outlook for inflation. But which one?

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